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on Contract Theory and Applications |
| By: | Celli, Gian Luca |
| Abstract: | The proposed research model from “Optimal Debt Contracts under Costly Enforcement” alters the original Costly State Verification (CSV) model introduced by Townsend (1979) by assuming that monitoring is non-contractible and non-deterministic. It emerges, from my analysis, that there are technical problems with the entrepreneur participation constraint. Particularly, the authors did not frame the principal optimization problem taking in to account a type-dependent participation constraint. To correct for this errors, I developed an adverse selection model that integrates the agent out-side opportunity utility. This approach opens up in to an interesting research turf on hypothetical creditors and debt market segmentation. |
| Keywords: | Debt Tiers, Agency Costs, Debt Management, Debt Contract, Costly Enforcement, Adverse Selection Models, Investor Heterogeneity |
| JEL: | D86 |
| Date: | 2008–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14545&r=cta |
| By: | Osmundsen, Petter (University of Stavanger); Sørenes, Terje; Toft , Anders |
| Abstract: | , |
| Keywords: | Oil |
| JEL: | A10 |
| Date: | 2009–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:stavef:2009_007&r=cta |
| By: | Bhimani, Al; Hausken, Kjell (University of Stavanger); Ncube , Mthuli |
| Abstract: | x |
| Keywords: | Principal; Agent; Outsourcing; Hostile Takeover |
| JEL: | A10 |
| Date: | 2009–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:stavef:2009_002&r=cta |
| By: | Liam Graham; Stephen Wright |
| Abstract: | We provide a microfounded account of imperfect information in a dynamic general equilibrium model by describing heterogeneous households that acquire information only through their participation in markets. Thus incomplete markets will imply incomplete information. We solve the model taking full account of the infinite regress of expectations, and show that the properties of the model change dramatically. Under virtually all calibrations the impact response of consumption to a positive aggregate technology shock is negative. If households observe a noisy public signal in addition to the information they obtain from markets, consumption responds to shocks sluggishly |
| Keywords: | imperfect information, higher order expectations, Kalman Filter, dynamic general equilibrium |
| JEL: | D52 D84 E32 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1503&r=cta |
| By: | Elena Panova |
| Abstract: | This paper investigates how competition in the media affects the quality of news. In our model, demand for news depends on the market perception of the media's ability to receive correct information: it is positive if and only if news is potentially useful for the voting decision. When the media receives information which contradics commonly shared priors, it either reports this information or it confirms the priors: "most likely, my information is correct, but my potential buyers may be unable to assess the quality of news and attribute it according to common priors". We ask whether competition may help to elicit information from the media. Our answer is positive when news covers issues on which the priors are sufficiently precise, or the follow-up quality assessment is a likely event. However, when news concerns controversial issues and it is hardly possible to asses its quality, competitive pressures induce confirmatory reporting. |
| Keywords: | Competition in the media, quality of news, common priors, reputational cheap-talk |
| JEL: | L82 L10 D82 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0912&r=cta |
| By: | Richard A. Lambert; Christian Leuz; Robert E. Verrecchia |
| Abstract: | The consequences of information differences across investors in capital markets are still much debated. This paper examines the relation between information differences across investors and the cost of capital, and makes three points. First, in models of perfect competition, information differences across investors affect a firm’s cost of capital through investors’ average information precision, and not information asymmetry per se. Second, the average precision effect of information that is heterogeneously distributed across investors is unlikely to diversify away when there exist many firms whose cash flows covary. Thus, better disclosure can reduce a firm’s cost of capital. Third, the precision effect does not give rise to a separate information-risk factor. These points are important to empirical research in accounting and finance, as well as to regulators who debate future disclosure requirements and the consequences of prior requirements such as Regulation Fair Disclosure. |
| JEL: | G12 G14 G31 M41 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14881&r=cta |
| By: | John Mc Breen (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat, IXXI - Institut rhône-alpin des systèmes complexes - INRIA - Ecole Normale Supérieure de Lyon - ENS Lyon - Institut National des Sciences Appliquées de Lyon - Université Claude Bernard - Lyon I - Ecole Normale Supérieure Lettres et Sciences Humaines - Université Joseph Fourier - Grenoble I - CNRS - IRD, Phys-ENS - Laboratoire de Physique de l'ENS Lyon - CNRS : UMR5672 - Ecole Normale Supérieure de Lyon - ENS Lyon); Florence Goffette-Nagot (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Pablo Jensen (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat, IXXI - Institut rhône-alpin des systèmes complexes - INRIA - Ecole Normale Supérieure de Lyon - ENS Lyon - Institut National des Sciences Appliquées de Lyon - Université Claude Bernard - Lyon I - Ecole Normale Supérieure Lettres et Sciences Humaines - Université Joseph Fourier - Grenoble I - CNRS - IRD, Phys-ENS - Laboratoire de Physique de l'ENS Lyon - CNRS : UMR5672 - Ecole Normale Supérieure de Lyon - ENS Lyon) |
| Abstract: | We simulate a closed rental housing market with search and matching frictions, in which both landlord and tenant agents are imperfectly informed. Homogeneous landlords set rents to maximise revenue, using information on the market to estimate the relationship between posted rent and time-on-the-market (TOM). Tenants, heterogeneous in income, engage in undirected search accepting residences based on their idiosyncratic tastes for housing and a disagreement point derived from information on the distribution of offers. The steady state to which the simulation evolves shows price dispersion, nonzero search times and vacancies.The main results concern the effects of increasing information on either side of the market. When tenants see a greater percentage of the distribution of offers, tenants learn to refuse high rents and so the population rises and tenants' utilities rise as does overall welfare. Conversely, when landlords have less information, their utility can rise as over estimations in best posting rent move the market to higher rents. |
| Keywords: | Real estate; Rental markets; Search; Information; Simulation; Multi-agent systems |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00374157_v1&r=cta |
| By: | Schouten, Michael C. |
| Abstract: | The use of equity derivatives to conceal economic ownership of shares (“hidden ownership”) is increasingly drawing attention from the financial community, as is the exercise of voting power without corresponding economic interest (“empty voting”). Market participants and commentators have called for expansion of ownership disclosure rules, and policymakers on both sides of the Atlantic are now contemplating how to respond. Yet, in order to design appropriate responses it is key to understand why we have ownership disclosure rules in the first place. This understanding currently appears to be lacking, which may explain why we observe divergent approaches between countries. The case for mandatory ownership disclosure has also received remarkably little attention in the literature, which has focused almost exclusively on mandatory issuer disclosure. Perhaps this is because most people assume that ownership disclosure is a good thing. But why is such information important, and to whom? This paper aims to answer these fundamental questions, using the European disclosure regime as an example. First, the paper identifies two main objectives of ownership disclosure: improving market efficiency and corporate governance. Next, the paper explores the various mechanisms through which ownership disclosure performs these tasks. This sets the stage for an analysis of hidden ownership and empty voting that demonstrates why these phenomena are so problematic. |
| Keywords: | ownership disclosure; market efficiency; corporate governance; monitoring; hidden ownership; empty voting; hedge fund activism |
| JEL: | K20 G38 K22 G34 G10 G30 |
| Date: | 2009–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14138&r=cta |